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2020 (9) TMI 825 - HC - Income TaxRevision u/s 263 - As per CIT AO has categorically failed to verify the deduction u/s 54 - ITAT quashing the revision order - HELD THAT - Essential condition for the exercise of power u/s 263 that the Commissioner of Income Tax must find an error which is found in the assessment order of the Income Tax Officer prejudicial to the interest of the Revenue and conclusion of the Commissioner that the order is erroneous and prejudicial to the Revenue must be based on materials and contentions raised by the assessee on opportunity of hearing being afforded to him. The findings of facts recorded by the Appellate Tribunal is that one of the requisite conditions for the exercise of power under Section 263 of the Act that the Commissioner should consider the assessment order to be erroneous and prejudicial to the interest of the Revenue is not satisfied in the present case. In arriving at such conclusion, the appellate Tribunal has assigned cogent reasons. - Decided against revenue.
Issues:
1. Interpretation of Section 263 of the Income Tax Act, 1961 regarding revision of assessment orders. 2. Validity of the order passed by the Appellate Tribunal in quashing the revision order under Section 263. 3. Determination of whether the assessment order was erroneous and prejudicial to the interest of the Revenue. 4. Consideration of eligibility of deduction under Section 54F of the Income Tax Act. Issue 1: Interpretation of Section 263 of the Income Tax Act, 1961 The judgment discusses the power conferred upon the Principal Commissioner of Income Tax under Section 263 of the Act, allowing revision of assessment orders if found erroneous and prejudicial to the Revenue's interest. It highlights the requirement of concurrent satisfaction of the order being both erroneous and prejudicial for the Commissioner to exercise revisional jurisdiction. The judgment emphasizes that the provision cannot be invoked to correct every mistake made by the Assessing Officer, but only when there is an error causing prejudice. Issue 2: Validity of the Appellate Tribunal's Order The Appellate Tribunal, in this case, allowed the appeal of the assessee, setting aside the revision order passed under Section 263. The Tribunal's decision was based on the argument that the Assessing Officer had not erred in allowing the deduction under Section 54F. It noted that the AO had made necessary inquiries and considered relevant documents, demonstrating a plausible interpretation of the law. The Tribunal held that the revisional jurisdiction could not be exercised unless the AO's decision was found to be erroneous, which was not the case here. Issue 3: Determination of Error in the Assessment Order The judgment discusses the assessment order under Section 143(3) of the Act, which was revised by the Principal Commissioner under Section 263 due to alleged errors in allowing the deduction under Section 54F. It outlines the details of the transaction where the assessee claimed exemption for the purchase of a property under Section 54F. The department argued that the assessee had erroneously claimed the exemption for purchasing three independent units, which did not qualify as a single residential house. The Principal Commissioner set aside the assessment order, considering it prejudicial to the Revenue's interest. Issue 4: Eligibility of Deduction under Section 54F The judgment delves into the eligibility of the deduction claimed by the assessee under Section 54F for the purchase of property. It analyzes the interpretation of the term "residential house" in the context of Section 54F based on judicial precedents. The Appellate Tribunal found that the AO had considered the issue in a wider spectrum, and there was a plausible interpretation of the law in favor of the assessee. It concluded that the AO's decision was not arbitrary or capricious, and the revisional jurisdiction was not warranted in this case. In conclusion, the High Court dismissed the appeal by the Revenue, upholding the decision of the Appellate Tribunal to quash the revision order under Section 263. The judgment emphasized the importance of satisfying the conditions of error and prejudice for invoking revisional jurisdiction and highlighted the need for a substantive error causing loss of revenue to exercise such powers.
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